Marsh warns in particular that climate change is not a risk factor built into most Asian infrastructure investment models
Failure to consider the impact of climate change on infrastructure assets is leaving major developments exposed to increased long-term physical risks, according to Marsh.
Its report, Sustainable Infrastructure – Weathering the Storms, says the sustainability of infrastructure assets should be assessed at the project inception stage and throughout the asset’s lifecycle.
But many investors have yet to build climate change into their risk models.
This is particularly the case for those operating in sectors or geographies still largely unaffected by severe weather or environmental pollution.
Marsh’s regional director and Asia infrastructure practice leader Ian Brown said: “In Asia, climate change is not generally a risk factor that is built into infrastructure investment models at this time.
“The sheer demand for infrastructure in the short term too easily shifts focus away from the longer-term risks such as changing environmental conditions and climate change.”
However, Brown said that as investors continued to look to Asia for infrastructure investment opportunities, “climate change should – and will – move up the priority list”.
The report considers how key stakeholders involved in infrastructure development could implement best practice and manage the risks associated with climate change more effectively.
Methods include wider climate change risk due diligence, which improves project delivery and operational efficiency throughout the asset lifecycle; more effective management of force majeure risks in a long-term, economically sustainable form between the public and private sectors; and how the impairment of debt servicing capabilities can be avoided through more robust risk pricing and risk mitigation measures.
Marsh head of infrastructure risk advisory services Martin Bennett said: “We face an uncertain future and climate change will continue to challenge the nature of infrastructure investments. It cannot be overlooked where investment is being made in infrastructure that is expected to perform for many decades.”